Expand Your Student Loan Knowledge

This is material I thought would be worth sharing courtesy of my Financial Planning Software Provider RightCapital.   We believe it is important to be an informed consumer of college education and want people to have an education on these programs with the hope of minimizing or even avoiding take on debt to pay for college.  This article includes facts and information that will help you to understand the nuances of college debt.

Federal Student Loans

Federal student loans are offered by the government, with terms and conditions that are set by law. These loan types include many benefits such as a fixed interest rate, income driven repayment plan options and eligibility for Public Service Loan Forgiveness (PSLF) not typically offered with private loans.

Private Student Loans

Private loans are offered by private organizations such banks, credit unions, and state- based or state-affiliated organizations. These loan types have terms and conditions that are set by the private lender. Private student loans are generally more expensive than federal student loans.

Below is a graph that outlines different types of student loans and categorizes them by federal and private lenders.

Loan Servicer

A loan servicer is a company that is assigned to handle federal student loan debt on the government’s behalf. The loan servicer will assist you with tasks related to your federal student loans. You can contact the loan servicer to obtain standard 10 year payment, new borrower status information or any other relevant information. If your circumstances change at any time during their repayment period, the loan servicer will be able to help. If you are unsure of your loan servicer look for the most recent communication from the entity sending bills for the loan payments.

Below is a list of loan servicer’s and their contact information. These contacts can be used to gather additional details needed for an in-depth student loan analysis.

Loan Servicer Contacting Information

Federal Student Aid Information Center (FSAIC) at 1-800-433-3243.

Loan Servicer                                              Contact 

Default Resolution Group (also known as Maximus Federal Services, Inc.)

1-800-621-3115 (TTY: 1-877-825-9923 for the deaf or hard of hearing)

Student Loan Repayment Plans

Student Loans can be repaid in a variety of different methods depending on the your situation. The different plans may seem similar, but each has distinct pros and cons. Note that if you didn’t choose a repayment plan, the loan servicer will automatically place you on the Standard Repayment Plan.

Income-Driven Repayment

Income-driven repayment (IDR) plans are designed to make student loan debt more manageable by reducing the monthly payment amount. If you need to make lower monthly payments or if your outstanding federal student loan debt represents a significant portion of your annual income, one of the following income-driven plans can be used. After 20 to 25 years of steady repayment, the remaining balance is forgiven

Income Driven Repayment Plan

Payment Amount

REPAYE           Generally 10% of discretionary income

PAYE               Generally 10% of discretionary income

IBR                  Generally 10% of discretionary income if you’re a new borrower on or after 7/1/2014, but never more than the 10-year Standard repayment plan amount.   Generally 15% of discretionary income if you’re not a new borrower on or after 7/1/2014, but never more than the 10-year Standard repayment plan amount

Related Articels